Brisbane’s commercial leasing market is starting to pick up as smaller companies lead the charge into top-end office space.
Agents report more deals have been finalised after a slow 2020 characterised by uncertainty and debate over the long-term future of the traditional office.
Local landlords have responded by offering prospective tenants shorter leases, more flexibility and value-adds such as fit-outs.
These strategies have proved particularly effective with brokerage businesses – those companies seeking up to 500 square metres.
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Office giant Dexus said it had signed 27 leasing deals in the past six months, 21 of them with new clients, all of which start this year.
The leases cover more than 9300sq m across key Brisbane CBD buildings such as The Annex at 12 Creek St, 10 Eagle Street, Waterfront Place and 145 Ann Street.
“We have seen new and existing office customers commit to longer lease terms – a positive signal that businesses in Brisbane are optimistic about the future,” Dexus’ general manager for Queensland, Matthew Miller, said.
The weighted average term across the new leases was 4.6 years, significantly shorter than the Dexus national office average of 6.7 years.
Dexus said most of the new leases were for sub-500sq m fitted suites and spaces, which brought the average lease term down.
It said face rents held and that 60 per cent of the new clients were trading up from B Grade offices or moving from near city locations.
The head of office leasing in Queensland for JLL, James Montague, said inquiry volumes had been steadily increasing.
“We are seeing deals that are being done that should have been done in 2020 but were delayed due to uncertainty,” Mr Montague said.
“Walking around the streets of Brisbane it certainly feels busier than it was last year. There’s more activity and the market is starting to improve.
“There have certainly been some aggressive terms offered by landlords to fill up vacancies in their portfolio. They have moved quickly to adjust to the new market dynamics.”
CBRE’s managing director for Brisbane, Chris Butters, said the biggest trend had been the increase in inquiries from smaller businesses for quality CBD office space.
“There’s been an overwhelming focus on fitted-out accommodation over vacant space,” he said.
Mr Butters said lease terms had contracted and were now typically two to three years rather than five years or more.
“Face rents have held firm but incentives have remained elevated,” he said.
Apart from shorter leases, most of the incentives revolve around flexibility, such as the ability to upsize or downsize without penalty or being able to modify the fitout.
Property Council of Australia research revealed Brisbane CBD vacancy rates increased from 12.9 per cent to 13.6 per cent in the six months to January this year because of negative demand.
It said there was over 125,000sq m of space due to come online over the next two years and “with the exception of premium, all grades of space have vacancy above 13 per cent”.
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